I'd like to just declare it as 'real estate'.

You should be able to look at whatever form they declare their self employment income on, apply that same logic (find net number, add back 'paper' or mythical expenses, divide by 12) to get your answer.Unless you want mortgage lenders to crap on you because you have a Schedule E in your tax returns, you shouldn't crap on self employed persons that report their income on Schedule C.

Primarily; a court may see the transference of money as an attempt to circumvent the secured claims of your vendors that most likely exist, and such transfers could potentially be declared void.I'm sure there are other types of attorneys out there who have similar aversions to this kind of transaction policy, so I would recommend seeking legal counsel first, someone licensed in your own state.DISCLAIMER: Above for educational purposes alone.

I dont know if it is possible to simply declare your taxes locally with corresponding deductions and what requirements you would need ti be able to register locally. 

Off topic, there are a myriad of complexities in her now living in the house she does not own and how you're going to declare this as a property.  

He can have Power of Attorney, BUT unless her Doctor has declared her mentally incompetent it will not stand up in court.

Technically it's a default on the terms of the mortgage (assigning the deed over to another entity) so if the bank finds out they can declare a default and call your note due.My experience...don't tick off your banker.

Are there any neighbors you know who could tell you if lets say a 6 ft 5 inch heavily tattooed muscle bound color flying man showing up there with regularity? 

Force them to jump through the hoops and force them to declare themselves disabled, and to get a doctor to vouch for it. 

We have building here the original Quakers built, Besty Ross's house is still standing, and thousands of people walk through Independence Hall (where the Declaration of Independence was created and the Constitution of America debated).